HELP: Corporate raiders & Asset stripping ??? (1 Viewer)

[KAty]

hCan somebody please give me a definition of corporate raiders and asset stripping??? (Financial planning and management)

Two books say two different things

Please help me

 

[truly-in-bliss]

what do you think it means?

 

[KAty]

truly in bliss

My text says:
Corporate raiding involves a business buying a large number of shares in another company with the aim of gaining control of that company. Usually the assets and share value of the company being raided is low. The raid would force up the value of the shares. The raider could then sell the shares purchases at a substantial profit.

Asset stripping involves a company purchasing a controlling interest in another company and then disposing of the under-valued assets.


Both dont make sense to me can you please tell when what u understand of the terms>>

 

[truly-in-bliss]

Basically think of coporate raiders as the entrepreneurs who are out there to make lots of money. They intimmidate the company by buying underperforming and undervalued companies, but they dont do anything to build /rebuild the company.

asset stripping is the process of buying companies that have being undervalued on their balance sheet.

The bit where coporate raiders and asset striping differs is that with the process of asset stripping, the pplz who bought assets are most likely contribute to the company eg: install new management etc.

Hence basically think of asset stirpping like a house for auction. You have a crappy house in an expansive area, some guys buys the house and then renovate it, then they sell it at market value. That is how they make their profits.

 

[KAty]

truly in bliss

Hey 'Truly in bliss' what subjects do u do and what are your overall ranks

 

[Claire]

Just think - Pretty Woman - Richard Gere is a corporate raider in that movie!

 

[FLR-IT]

lol

but a great def.

 

[KAty]

Truly in bliss
i understand your definition
but, how do corporate raiders make money if they buy these undervalued and underperforming companies, but do nothing to rebuild them??
do they just revalue the business and thens sell straight away??

 

[truly-in-bliss]

nah a lot of the times... they try to *eat up* the biz.....so frequently biz just rots away... and then they sell the remaining of the biz..... in the legal sense its called a merger or aquisition.. but its really a merger in the dirtiest sense.

Originally posted by KAty
Hey 'Truly in bliss' what subjects do u do and what are your overall ranks

i do ext 2 eng, ext 2 maths, eco and biz. ranks..umm... hahah lets not talk abt it.. hahaha

 

[KAty]

sorry i know this is annoying u hahah
but i still dont understand would they be running at a loss rather than making a profit

 

[truly-in-bliss]

nope, because the company is undervalued.. so think abt it.... person A has this factory, and he thinks its worth $1, person B know the factor is acutally $5, so he buys the factory off the person for $1, and then wait until the factory cannot operate animore, and then he sells all assets for $4, so he makes a profit of $3. in reality asset strippign and coporate raiders are much more complicated than thhes simple explanations... but u dont need to know that much for the hsc.. same goes for hedgin etc.

 

[Dash]

Hedging?
How does hedging fit into all this?